Lawyer Monthly Magazine - July 2019 Edition

shareholder would not be permitted to vote on such resolutions. (ii) Event Based: SR shares shall compulsorily get converted into ordinary shares on occurrence of certain events such as demise, resignation of SR shareholders, merger or acquisition where the control would be no longer with SR shareholder, etc. (g) Fractional Rights Shares: The issue of fractional rights shares by existing listed companies shall not be allowed hereon. The need for allowing issue of fractional rights shares by listed companies may however be reviewed after gaining enough experience with the use of SR shares. Risk Management Framework of Liquid Funds and prudential norms On 27 June 2019, SEBI Board after deliberations approved the risk management framework of liquid funds and prudential norms governing investments in debt and money market instruments. The key proposals approved are as follows: (a) Liquid schemes shall be mandated to hold at least 20% in liquid assets such as, cash, Government securities, treasury bills and Repo on Government securities. (b) The cap on sectoral limit of 25% shall be reduced to 20%. The additional exposure of 15% to housing finance companies (HFCs) shall be restructured to 10% in HFCs and 5% exposure in securitized debt based on retail housing loan and affordable housing loan portfolios. (c) The valuation of debt and money market instruments based on amortization shall be dispensed with completely and shall be based on mark to market. (d) Liquid and overnight schemes shall not be permitted to invest in short term deposits, debt and money market instruments having structured obligations or credit enhancements. (e) A graded exit load shall be levied on investors of liquid schemes who exit the scheme up to a period of 7 days. (f) Mutual Fund schemes shall be mandated to invest only in listed non-convertible debentures and the same would be implemented in a phased manner. All fresh investments in commercial papers (CPs) shall be made only in listed CPs pursuant to issuance of guidelines by SEBI in this regard. (g) All fresh investments in equity shares by Mutual Fund schemes shall only be made in listed or to be listed equity shares. (h) Prudential limits on total investment by a Mutual Fund scheme in debt and money market instruments having credit enhancements and on investment by Mutual Fund scheme in such debt securities of a particular group, as a percentage of debt portfolio of the respective scheme have been prescribed at 10% and 5% respectively. (i) There should be adequate security cover of at least 4 times for investment by Mutual Fund schemes in debt securities having credit enhancements backed by equities directly or indirectly. LM 1 Municipal bonds are debt obligations issued by States, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects such as building schools, highways and other projects for the public good. For example, if a municipal corporation establishes a new metro rail link, then it can issue municipal bonds to fund the project. 2 In terms of the RBI/2018-19/152 A.P. (DIR Series) Circular No. 26 dated 27 March 2019, the revised limit for FPI investment in State Development Loans (SDLs) shall be 2% of outstanding stocks of securities in FY 2019-20. Vineet Aneja I am the Managing Partner as well as a founding partner of Clasis Law. My professional journey as a lawyer began more than 20 years ago and I have a plethora of experi- ence across practice areas such as corporate commer- cial, retail, hospitality, em- ployment, e-commerce, education, healthcare, white collar. I have provided spe- cialized transactional and advisory services across sec- tors, covering diverse areas including: • Joint ventures and strate- gic alliances, mergers and acquisitions including private equity, venture capital, busi- ness transfers, disposals and combinations of businesses, buy-outs, carve-outs, restruc- turing and divestment; • General corporate ad- visory in relation to day to day matters, advice and as- sistance in setting up and running a business in India including the issues relating to foreign exchange laws of India; • Advice and assistance on the exit options; advising on viable modes of structuring of the deal, from a regulatory and exchange control per- spective; • Advising clients on the ap- plicability of various employ- ment laws in India, both Cen- tral and State level legislations; guidance in employment ter- mination/ downsizing. 29 Clasis Law JUL 2019 www. lawyer-monthly .com